CHICAGO -- As harsh marketing requirements in Canada literally force c-store retailers there to cover up their tobacco racks, operators in the Unites States contemplate the potential effects of such a law here. "Bleak" is what retailer Mark Wolbert, director of sales and marketing for Wilson Farms Inc., Williamsville, N.Y., said the situation would be for his chain of about 200 stores. Wolbert was on a panel at the 2008 NACS convention and trade show that discussed the pressures hitting the industry's No. 1 category.
Canadian law now bars merchants from even showing cigarettes in the store. [image-nocss] Photos presented at the NACS workshop depicted back-bar displays covered over with curtains, flags or tarp. The regulations even extend to what employees can say and what customers have to do to correctly request merchandise, according to Dave Bryans, president of the Canadian Convenience Stores Association.
Lyle Beckwith, senior vice president of government relations for the National Association of Convenience Stores, provided an update to the estimated 125 session attendees on potential new legislation that could affect tobacco retail in the United States. He said that although told by lawmakers to "strike a deal" regarding impending government oversight of tobacco from the Food & Drug Administration (FDA), he said the association got its biggest concern off the table, which was the need for states to retain ultimate control over regulation versus. turning complete control over to the FDA.
Still, for some American chains, the pressure on tobacco sales is already a given. "In our case, over 60% of cigarettes are sold through native Americans," Wolbert said. "So there's been steady erosion [in cigarette sales] and on June 3, New York added a $1.25 tax."
Already known for its reliance on grocery items versustobacco, Wilson Farms ramped up its operational strategies, engaging in three distinct tactics:
Reinvesting in people. The chain improved its employment processes, finding and hiring what Wolbert called "more competent" people. Micro-marketing. Wolbert said they are moving from a "vanilla" approach back to their roots as a neighborhood food store, adapting better to store surroundings, for instance, making a store that is near a college more appealing to students. Bringing in more category management. Taking a more structured approach to each category is also proving advantageous for the chain.Answering a hypothetical question of what would happen if the tobacco category were to evaporate altogether, a Canadian retailer on the panel said simply that he would be out of business. "It would mean 27% to 50% of merchandise sales and 17% to 40% of gross profit [gone]," said Norm Dickinson, director of merchandising for the Canadian chain Quickie Convenience Stores, Ottawa, Ontario. "It's our largest source of sales revenue and gross profit dollars."
Theory aside, Dickinson's chain has managed to beat the odds, focusing in on inventory turns and internal mystery shops to address key operational issues. Today, he said that while the convenience channel in Canada is averaging a 10% decrease in sales, his company is up 9%.To read more on this subject, see a related story beginning on page 149 of the October issue of CSP magazine.
[Pictured (left to right): Dave Bryans (moderator) Canadian Convenience Stores Association; Norm Dickinson, Quickie Convenience Stores; Peter Karrys, Karrys Bros. Ltd.; Mark Wolbert, Wilson Farms; Peter Bakun, Rothmans, Benson & Hedges Inc.; and Lyle Beckwith, NACS.]Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.